WHATS NEXT'''

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WHATS NEXT...?!!

• 2 WEEKS
• FINAL EXAM!!!!!!

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FINAL EXAM

• TWO OF FOUR ESSAYS 200
• TEN MULTIPLE CHOICE 100

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COMPREHENSIVE ESSAY

• AUDIT THEME
• RELATE AUDIT PHASES
• AUDIT FINDINGS

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COMPREHENSIVE ESSAY

• AUDIT PROCESS HANDOUT
• SIX PHASES
• ACTIVITIES
• PRODUCTS

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SECOND ESSAY

• 1 OF OTHER 3 QUESTIONS
• ONLY RECENT STUFF
• AUDIT REPORTS
• ALL BUT ONLY

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ONLY RECENT STUFF

• CASH
• ACCOUNTS RECEIVABLE
• ACCOUNTS PAYABLE
• EXPENSES/CUTOFFS
• INVENTORY
• FIXED ASSETS

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ONLY RECENT STUFF

• SUBSTANTIVE TESTS OF BALANCES
• WRAP-UP PHASE
• - SEARCH FOR UL SSE
• - SUMMARIZE CONCLUDE - PJE
• ISSUE REPORT

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EXPENDITURE CYCLE

• MIRROR OF THE REVENUE CYCLE

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EXPENDITURE CYCLE

• PREPAID EXPENSES
• ACCOUNTS PAYABLE ACCRUED LIABILITIES
• EXPENSE ACCOUNTS

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ACCOUNTS PAYABLE ACCRUED LIABILITIES

• LIABILITIES -
• FOCUS ON UNDERSTATEMENT

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WORKPAPER SCHEME
BSL
AA LEAD
AA-1 A/P T/B
AA-2 A/L ANALYSIS
AA-1/1 CONFIRMS
AA-1/2 SEARCH FOR U/L
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ACCOUNTS PAYABLE ACCRUED LIABILITIES

• TRIAL BALANCE OF A/P
• X-REF TO LEAD
• FOOT
• ALL ONLY TEST TO/FROM A/P SUBSIDIARY LEDGER

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WORKPAPER SCHEME
BSL
AA LEAD
AA-1 A/P T/B
AA-2 A/L ANALYSIS
AA-1/1 CONFIRMS
AA-1/2 SEARCH FOR U/L
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CONFIRMATION OF A/P

• SELECT SAMPLE
• MAIL 1st 2nd REQUESTS
• NONREPLIES
• TOTAL ERRORS IN SAMPLE
• EXPLODE TO POPULATION

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SELECTING SAMPLE

• BLIND REQUESTS
• ZERO BALANCE ACCOUNTS
• MAJOR SUPPLIERS

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VOUCHING A/P

• VOUCHING - Examine documents supporting a payable
  or disbursement

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VOUCHING A/P

• VENDORS INVOICE
• BILL OF LADING PACKING LIST
• RECEIVING DOCUMENTS
• PURCHASE ORDER
• CHECK REQUEST

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SEARCH FOR UNRECORDED PAYABLES

• PART OF WRAP UP PHASE A CUTOFF TEST

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SEARCH FOR UNRECORDED PAYABLES

• EXAMINE SUBSEQUENT C/D OVER A SCOPE
• LIST C/D RELATED TO Y/E
• TRACE TO RECORDED A/P
• TOTAL UNRECORDED A/P
• PROPOSE JOURNAL ENTRY

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SEARCH FOR UNRECORDED PAYABLES

• CONTINUES THRU LAST DAY OF FIELD WORK
• GRADUATED SCOPE

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AUDITING EXPENSES

• AUDITING BY EXCEPTION

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ALREADY PERFORMED?

• UNDERSTANDING CLIENT
• ASSESS INTERNAL CONTROL
• TEST CONTROL TECHNIQUES
• SUBSTANTIVE TESTS
• TESTS OF Y/E A/P

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ALREADY PERFORMED?

• WAGE SALARY EXPENSE - Payroll cycle audit
• DEPRECIATION EXPENSE - Audit of Fixed Assets
• INTEREST EXPENSE - Audit of Loans Payable
• COST OF GOODS SOLD - Audit of Inventory Sales

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AUDIT BY EXCEPTION

• DO ANALYTICAL REVIEW
• FOR UNUSUAL VARIATIONS, DO ADDITIONAL WORK -
  - Reasonable Business Explanation -
  Error and PJE
• NO UNUSUAL VARIATIONS, STOP

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AUDIT EXPENSES

• SOME HIGH RISK EXPENSES ARE ALWAYS ANALYZED -
• - Travel Entertainment
• - Legal Professional Fees
• - Donations
• - Repairs Maintenance

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PRODUCTION CYCLE

• INVENTORY
• FIXED ASSETS

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PHYSICAL COUNT

• COUNT
• COMPILATION
• (VALUATION)
• BOOK-TO-PHYSICAL
• ADJUSTMENT

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COUNT - CLIENT MUST DO

• BEFORE THE COUNT -
• Housecleaning
• Disposal of damaged/obsolete goods
• Close shipping/receiving
• production around Y/E
• Written count plan/instructions
• Preprinted count tags or lis
  (Blind or prepared media?)
• Count team meeting

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COUNT - CLIENT MUST DO

• DURING THE COUNT
• Assigning teams to segregate duties
• Assigning recounters supervisors
• Maintaining count tag control
• Count recount
• Resolving counting problems
• Shipping receiving during count
• Review for completeness
• Collect account for all tags
• Complete count tag control

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COMPILATION - CLIENT MUST DO

• AFTER THE COUNT
• Sort accumulate count tags
• Transcribe counts from tags to medium
• Adjust counts for in-transit items
• Price items using FIFO or LIFO
• Apply Lower-of-cost-or-market to items
• Extend and foot inventory
• Record book-to-physical adjustments

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BOOK-TO-PHYSICAL -CLIENT MUST DO

• CALCULATE ADJUSTMENT
• RECORD ADJUSTMENT

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COUNT - AUDITOR MUST DO

• BEFORE THE COUNT -
• Review count plan
• Pre-count tour of facilities
• Identify most valuable items
• Attend count team meeting
• Assure shipping/receiving production are closed

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COUNT - AUDITOR MUST DO

• DURING THE COUNT -
• Observe counters
• Do test counts
• Observe handling of count problems
• Observe count tag control process
• Observe rust, dust dents
• Obtain shipping/receiving cutoff samples
• Count high value items
• Calculate rough estimate of total inventory
• Review for completeness
• Observe collection of accounting for tags

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COMPILATION - AUDITOR MUST DO

• AFTER THE COUNT
• Do all only tests for tags
• Tie in counts of high value items
• Test pricing
• Test lower-of-cost-or-market
• Check extensions footings

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BOOK-TO-PHYSICAL ADJUSTMENT - AUDITOR MUST DO

• CHECK CALCULATION
• CHECK POSTING

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SHIPPING/RECEIVING CUTOFF TESTS

• Sample of last shipping/receiving documents
  before y/e
• Sample of first shipping/receiving documents
  after y/e
• Trace shipments to sales recorded in Sales
  Journals
• Trace receipts of goods to purchases recorded in
  Purchases Journals
• Consider effect of FOB shipping terms
• Propose adjustment for any errors in cutoff

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CUTOFFS

• SEE PROBLEM 21-32 ON PAGE 662

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AUDIT OF FIXED ASSETS

• Differences from audit of receivables inventory
• Focus on current activity not whole balance
• Fewer transactions
• Large, complex transactions
• Peripheral costs
• Financing affects value recorded
• Liens on assets
• Physical existence

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AUDIT OF FIXED ASSETS

• Vouching sample of additions
• Capitalize v. Expense
• Tests of depreciation
• Tax basis as well as book basis significant
• Auditing sample of disposals
• Gain/Loss on disposal
• Trade-ins v. sales
• Periodic physical counts unrecorded disposals
• Impairments in value